FTC Staff Comment to the Honorable Barbara S. Matthews Concerning California Senate Bill 401, To Amend the California Confidentiality of Medical Information Act

UNITED STATES OF A:vERICA
FEDERAL TRADE COMMSSION
WASHINGTON, D. C. 20580
Office of Policy Planning
Burcau of Consumer Protection
Bureau of Economics
Januar 20 , 2006
The Honorable Barbara S. Matthews
Assembly Member
Seventeenth District
California Legislature
State Capitol
O. Box 942849
Sacramento, CA 94249.0017
Re: California SB 401
Dear Assemblymember Matthews:
The staff of the Federal Trade Commission s ("FTC" or "the Commission ) Office of
Policy Planning, Bureau of Consumer Protection, and Bureau of Economics ! arc pleased to
respond to your letter asking for our views on California SB 401 ("SB 401'
')
Specifically, you
indicate your concern that SB 401' s prospective amendment of the California Confidentiality of
Medical Information Act ("CMIA") may have detrimentally restrained the flow of health
information to California consumers. SB 401 would have modified CMIA to require a
pharmacy, subject to certain exceptions , to obtain a patient's " opt. " consent before it may
provide a patient with "a written communication" in conjunction with a prescription if it
includes the trade name or commercial slogan for any prescription drug, prescribed treatment
therapy, or over.the.countcr medication other than the prescription drug or prescribed treatment
therapy being dispensed, if the communication is paid for or sponsored, directly or indirectly, by
a manufacturer, labeler, or distributor of prescription drugs.
This letter expresses the views of the FTC' s Office of Policy Planning, Bureau of
Consumer Protection , and Bureau of Economics. The letter does not necessarily represent the
views of the Commission or of any individual Commissioner. The Commission has , however
voted to authorize us to submit these comments.
Although the legislative session in which SB 401 was proposed has ended, we
understand you would still like our views on the bill because you are concerned that a similar bill
may be introduced in the future.
For purposes of this letter, we refer to a communication that "includes the trade
name or commercial slogan for any prescription drug, prescribed treatment therapy, or over.the.
counter medication other than the prescription drug or prescribed treatment therapy being
dispensed" and is "paid for or sponsored, directly or indirectly, by a manufacturer, labeler, or

This letter briefly summarizes the Commission s intcrest and experience in health care
and medical privacy and provides the staff's opinion regarding the possible impact of SB 401 on
consumers. Based on this experience, our review of your letter, and SB 401 , the FTC staff make
the following observations that we hope will be of assistance:
The Health and Human Services ("HHS") Health Insurance Portability and
Accountability Act of 1996 ("HlPAA") privacy rule generally requires an
individual' s opt-in consent before that individual's health information can be used
for marketing. But, in contrast to SB 401 , it is our understanding that the privacy
rule does not define a health care provider message as a marketing communication
that requires a patient's prior , affrmative opt.in approval for receipt merely
because it is sponsored. Thus , SB 401 would have been more restrictive than
HIAA' s privacy rule.
SB 401's prophylactic restraint on a type of commercial speech that is not
inherently unlawful or misleading' may have raised questions under the First
Amendment to the U.S. Constitution.
Proponents of SB 401 expressed concern that a sponsored communication may
confuse a consumer about the nature of the communication and imply that the
pharmacist sanctions a suggested alternative treatment or that it is a substitute for
a doctor s advice. Alternative, less restrictive measures, such as requiring the
clear and prominent disclosure of sponsorship, could hclp to ensure that patients
are not misled as to the source or funding for the communication , without limiting
consumers ' access to potentially useful health information.
A brief summary of the Commission s history in the health care industry and a detailed
analysis in support ofthe FTC staffs conclusions and suggestions is provided below.
distributor of prescription drugs" as a sponsored communication. For example, such a sponsored
communication would include a written communication provided by a pharacy to a patient in
conjunction with the dispensing of a prescription where the communication includes the trade
name or commercial slogan for a prescription drug, prescribed treatment therapy, or over.the.
counter medication other than the prescription being dispensed and the pharacy receives
remuneration from a manufacturer, labeler, or distributor for distributing the communication.
See infra Section II.
Of course , any sponsored communications that contain prescription drug
advertising would be subject to general advertising and labeling regulation, such as the Food and
Drug Administration s ("FDA") requirements for labeling. See, e. 21 U. C. 9 321(m) (2004)
(defining labeling for prescription drugs to include all labels and written , printed, or graphic
material upon or accompanying a drug, which would include sponsored communications) and 21
C.F.R. 9 201.100(d) (2002) (setting forth the disclosure requirements for promotional labeling).

Interest and Experience of the Federal Trade Commission
The FTC enforces Section 5 of the Federal Trade Commission Act ("FTC Act ), which
broadly prohibits "unfair or deceptive acts or practices in or affecting commerce.'" In addition
Section 12 of the FTC Act more specifically prohibits the dissemination of false advertisements
for foods , drugs , devices , services, or cosmetics In undertaking these enforcement
responsibilities , the Commission has acquired considerable experience in combating deceptive
health care practices and in addressing privacy and consumer protection issues relating to health
care.' The FTC has been active in recent years in pursuing formal actions in the broader health
care industry, including actions relating to pharmaceuticals " The FTC staff also have experience
in analyzing disclosures relating to pharmaceutical advertisements .' In addition , the FTC
15 U. c. 9 45.
15 U.S. C. 9 52. The FDA and the FTC generally share jurisdiction over
prescription drug advertising, although the FDA exercises primary responsibility for such
advertising pursuant to a memorandum of understanding between the two agencies. Working
Agreement Between FTC and FDA, 4 Trade Reg. Rep. (CCH) 1J 9 851 (1971).
See, e. Press Release , FTC , Online Pharmacies Settle FTC Charges (July 12
2000) (FTC v. Sandra L. Rennert et al.), available at http://www.ftc.gov/opa/2000/07/iog.htm;
Press Release , FTC , Eli Lily Settles FTC Charges Concerning Security Breach , Company
Disclosed E.mail Addresses of 669 Subscribers to its Prozae Reminder Service (Jan. 18 2002),
available at http://www.ftc.gov/opa/2002/01lelililly.htm; FTC , COMMISSION ACTIONS:
JANUARY 2002 (Jan. 18 2002) (File No. 012 3214 In the Matter of Eli Lilly and Company),
http://www. fte.gov/os/2002/01/index.htm.
See generally FTC, HEALTH CAR ANTITRUST ISSUES (2005),
http://www.fte. gov/be/healthindex.htm; FTC , FTC ANTITRUST ACTIONS IN PHARACEUTICAL
SERVICES AND PRODUCTS (June 2005), available at http://www.fte.gov/bc/0506rxupdate.pdf.
E.g. Letter from Mary K. Engle, Associate Director, FTC Bureau of Consumer
Protection, Division of Advertising Practices to David A. Balto Re: Longs Drug Stores Corp.
FTC File No. 022.3280 (Jan. 13 2003), available at
http://www.ftc.gov/os/closings/staff030113longsdrugstores.htm; Letter from Mar K. Engle
Associate Director, FTC Bureau of Consumer Protection , Division of Advertising Practices to
Jeffrey Davis Re: Wal.Mart Store, Inc. FTC File No. 022.3281 (Jan. 13 2003), available at
http://www.ftc. gov/os/closings/staff030113walmart. htm; Letter from Mary K. Engle , Associate
Director, FTC Bureau of Consumer Protection , Division of Advertising Practices to Philip A.
Proger Re: Rite Aid Corp. FTC File No. 022.3283 (Jan. 13 2003), available at
http://www.ftc.gov/os/closings/staff0300113riteaid.htm. Thcse lctters summarize FTC staff
decisions to close inquiries into whether pharmaceutical "switch program" letters sent to patients
failed to disclose adequately that the manufacturer of the drug referenced in the lctter paid for the
mailing or whether the letters contained any false or unsubstantiated claims.

provided comments to HHS on its H1PAA privacy rule when the rule was proposed
II. Summary of SB 401
California SB 401 would have amended CMlN! to change its definition of marketing.
As the Legislative Counsel' s Digest for SB 401 explains
, "
(e)xisting law prohibits a provider of
health care , a health care service plan, contractor, or corporation and its subsidiaries and affiliates
from intentionally sharng, selling, or otherwise using any medical information , as defined, for
any purpose not necessary to provide health care services to a patient, except as expressly
authorized by the patient, enrollee, or subscribcr, as specified, or as otherwise required or
authorized by law. "13
Under CMIA , this prohibition extends to the marketing of medical information.
Specifically, under current CAL. CIV. CODE 9 56. 1O(d): " (e)xeept to the extent expressly
authorized by the patient or enrollee or subscriber or as provided by subdivisions (b) and (c), no
provider of health care, health care service plan, contractor, or corporation and its subsidiaries
and affiliates shall intentionally share, sell , use for marketing, or otherwise use any medical
information for any purpose not necessary to provide health care services to the patient."!4
10 FTC Comment to the Department of Health and Human Services Concerning
Proposed HIPAA Privacy Rule (Feb. 17 2000), available at http://www.ftc. gov/be/vOOOOOl.htm
(supporting the proposed rule s "individual authorization " or "opt. " approach to the ancillar
use of individually identifiable health information for purposes other than those for which thc
information was collected).
CAL. CIV. CODE 9 56 et seq.
12 SB 401 , 2005 Leg. , 2005.06 Sess. (Cal. June 15 2005), available at
http://info.sen.ea. gov/pub/bill/sen/sb 040 1. 0450/sb- 40 1 bill 20050615 _amended asm. pdf.
Legislative Counsel' s Digest for SB 401. Id. at * 1.
14 CAL. CIV. CODE 9 56. 1O(d) (Jan. 1 2004). See also Legislative Counsel' s Digest
for SB 401 supra note 13 , at *1 ("Existing law provides that this prohibition also applies to the
marketing of any medical information , as defined, excluding from that definition , for these
purposes, communications for which the communicator does not receive remuneration from a 3'd
party or for specified descriptive purposes, or that are tailored to the circumstances of a paricular
individual , as specified.
CAL. CIV. CODE 9 56. lO(b) specifics nine instances where a provider of health care, a
health care service plan , or a contractor "shall" disclose medical information if "compelled" to do
so. For example, medical information shall be disclosed if compelled by a court order or other
lawful adjudicative authority.
-4.

Current CAL. CIV CODE 9 56.05(f) provides that
" '
(m)arketing ' means to make a
communication about a product or service that encourages recipients of the communication to
purchase or use the product or serviee."15 The statute also states that marketing docs not include
certain defined communications , including " (e )ommunieations made orally or in writing for
which the communicator docs not reeei ve direct or indirect remuneration , including, but not
limited to , gifts, fees , payments , subsidies , or other economic benefits, from a third party for
making the communieation. "16 Thus , non.sponsored communications that encourage recipients
to purchase or use certain products or services are not deemed marketing. In addition , the
Legislative Counsel's Digest for SB 401 states that current law also excludes from the definition
of marketing communications "tailored to the circumstances of a particular individual , as
specified. "1'
Proposed SB 401 would have amended the definition of marketing under CAL. CIV.
CODE 9 56. 05(1), such that:
Notwithstanding any other provision of law
, "
marketing" includes a
written communication that is provided to a pharmacy patient by a pharmacist or
by pharmacy personnel , in conjunction with the dispensing of a prescription drug
or prescribed treatment therapy, that includes the trade name or commercial
slogan for any prescription drug, prescribed treatment therapy, or over.the.eounter
medication other than the prescription drug or prescribed treatment therapy being
dispensed, if the communication is paid for or sponsored, directly or indirectly, by
a manufacturer, labeler, or distributor of prescription drugs. This paragraph shall
not apply when a trade name or commercial slogan for a prescription drug,
prescribed treatment therapy, or over.the.counter medication is included in a
written communication for the sole purpose of providing information about drug
interactions , reported or potential adverse events , or any other information
necessar to ensure the health and safety of the patient, or is part of a package
insert that has been approved by the federal Food and Drug Administration to be
distributed together with a prescription drug.
CAL. CIV. CODE 9 56. lO(c) specifies seventeen instances where a provider of health care
or a health care service plan "may" disclose medical information. For example, medical
information may be disclosed to health professionals for diagnosis or treatment, including in an
emergency situation.
CAL. Crv. CODE 9 56.05(f).
CAL. CIV. CODE 9 56.05(f)(1).
See Legislative Counsel' s Digest for SB 401 supra note 13 , at *1.
18 SB 401 supra note 12 , at *3-4 (proposing an amended version of CAL. CIV.
CODE 9 56.05(1)).

This expanded definition of marketing would have included a written communication
provided by a pharmacy to a patient in conjunction with the dispensing of a prescription whcre
the communication includes the trade name or commercial slogan for a prescription drug,
prescribed treatment therapy, or over.the.counter medication other than the prescription being
dispensed and thc pharmacy receives remuneration from a manufacturer, labelcr, or distributor in
exchange for doing so (a sponsored communication). It is our understanding that SB 401 would
have includcd as marketing a sponsored communication tailored to the specific circumstances of
a particular individual , unless it is for the sole purpose of providing information about drug
interactions, advcrse events , another health and safety issue, or is an FDA.approvcd insert. Thus
combined with the existing opt.in provision of CAL. CIV. CODE 9 56. 1O(d), SB 401 would have
modified CMIA to requirc a pharmacy to obtain a patient's opt. in consent before it can provide
that patient with such a sponsored, tailored written communication in conjunction with a
prescription drug or therapy. I'
Accordingly, it appears that under SB 401 a pharmacy would have needed to obtain a
patient s opt.in consent before it could, for example , attach a sponsored flyer to a bag containing
a patient s prescribcd arthritis medication if the flyer included an advertisement or coupon for a
specific over.the.counter pain reliever. Likewise, SB 401 could potentially have been interpreted
to require a pharacy to obtain a patient s opt-in consent before it could provide a sponsored
communication to the paticnt about another form of the medicine being prescribed , such as a
once.a.day dosage instead of a twiee. day dosage, since this could be deemed a therapy "other
than the prescription drug or prescribed treatment therapy being dispensed.
II. Comparison of SB'401 to Federal HIPAA Privacy Rule
The HHS HIAA privacy rule" gencrally requires an individual's opt.in consent before
that individual's health information can be used for marketing. But, according to HHS , under
its HlAA privacy rule " (t)he simple receipt of remuneration does not transform a treatment
19 For purposes of this letter, we interpret "a written communication that is provided
to a pharmacy patient by a pharacist or by pharmacy personnel , in conjunction with the
dispensing of a prescription drug or prescribed treatment therapy" as describing a writtcn
sponsored communication that is provided by the pharmacy at the same time and place that the
patient rcceives the prescribed drug or therapy. Different issues and concerns would be raised if
such sponsored, tailored communications are sent to consumers via regular mail or emails
delivered at a different time or place from the prescribed drug or therapy.
20 "Standards for Privacy of Individually 1dentifiable Health Information." 45
R. Parts 160 and 164. See 67 Fed. Reg. 53181 (Aug. 14 2002). The rule was issued
pursuant to the Health Insurance Portability and Accountability Act, Public Law 104. 191 , Aug.
1996. You may also want to contact HHS directly for its official interpretation of how
HI AA defincs a health care provider message.
45 c.F.R. 9 164. 508 (a)(3)(i).

communication into a commcrcial promotion of a product or service."" The HIAA privacy rule
specifically excepts from the definition of marketing communications that are made: (1) " (fJor
treatment of the individual" or (2) " (fJor case management or care coordination for the
individual , or to direct or recommend alternative treatments , therapies , health care providers, or
settings of care to the individual."23 Thus , a pharmacy communication recommending an
alternative or complementary prescription drug, alternative prescribed treatment therapy, or over.
the.counter medication may be excluded from the HIAA privacy rule s definition of marketing,
whether or not it is sponsored. In contrast, SB 401 ' s requirement would have considered such a
written communication recommending an alternative or complementary treatment to be
markcting - thus requiring opt.in consent - simply because the communication is sponsored.
Therefore, returning to the example providcd abovc, thc HIAA privacy rule would not
require a pharacy to obtain a patient's opt. in consent before it could attach a sponsored flyer to
a bag containing a patient's prescribed arthritis medication if the flyer included an advertisement
or coupon for an over.the.counter pain reliever, which could serve as a supplemental treatment
option. Under SB 401 , a pharmacy would have been required to obtain a patient's opt. in consent
before doing so.
IV. Restrictions on Commercial Speech
SB 401's prophylactic restraint on a type of commercial speech that is not inherently
unlawful or misleading may have raised questions under the First Amendment to the U.
22 DEPARTMENT OF HEALTH AND HUMAN SERVICES , HEALTH INFORMATION
PRIVACY AND CIVIL RIGHTS QUESTIONS & ANSWERS , ANSWER ID 285 (Dec. 20 , 2002 / July
2003), available at http://healthprivaey. answers.hhs.gov/cgi.
bin/hipaa.cfglphp/enduser/std adp. php?p_faqid=285&p_created= 1 04040560 1 &p_sid=mnk9bF
Mh&p_l va=&p_sp=cF9zcmN oPTEmcF9zb3JOX2J 5PWRmbHQmcF9ncmlke29ydDOmcF9yb3df
Y250PTEmcF9wcm9kczOmcF9jYXRzPTcsMCZw X3B2PSZw X2N2PTEuNzsyLn U w J nBfe2Vh
cmNoX3R5cGU9YW5zd2Vyey5zZWFyY2hfbmwmcF9wYW dlPTEmcF9zZWFyY2hfdGV 4dD
1za WI wbGU gcm VjZWlwdCBvZiByZW11 bm VyYXRpb24*&p_Ii=&p_topview=1. In response
to the qucstion
, "
Can a provider be paid to make a prescription refill reminder without prior
authorization?" HHS' s web site answers that it is not marketing in that case, and it also noted
that "it is not marketing when a doctor or pharmacy is paid by a pharmaceutical company to
recommend an alternative medication to patients. Id.
23 45 C.F.R. 9 164. 501. "Treatment means the provision , coordination , or
management of health care and related services by one or more health care providers, including
the coordination or management of health care by a hcalth care provider with a third party;
consultation between health care providers relating to a patient; or the referral of a patient for
health care from one health care provider to another. Id.

Constitution.24 First Amendment commercial spcech jurisprudcncc rccognizcs the value of
truthful information to consumers and to a competitive free enterprise system. In Virginia State
Board of Pharmacy v. Virginia Citizens Consumer Council the Supreme Court held that
commercial spcceh , including most advertising and labeling," is entitled to protection under thc
First Amendment. The Court concluded that the First Amendment protected the pharmaceutical
advertising at issue there becausc the free flow of truthful and non.misleading commercial
speech empowers consumers to make better.informed purchasing decisions and maximizes
24 Such questions are likely to be distinct from those raised by thc FTC' s "Do Not
Call" Registry, created in 2002. See generally 68 Fed. Reg. 9 4580 (2003) (Statement of Basis
and Purpose and final amended Telemarketing Sales Rule); FTC , NATIONAL DO NOT CALL
REGISTRY (2005), available http://www.fte.gov/donoteal1. First SB 401 would have required a
pharmacy, subject to certain exceptions , to obtain a patient s opt.in consent before it can bcgin to
provide thcm with a sponsored communication. By contrast, the Do Not Call List is an opt.out
systcm, in which consumers must register to stop unwanted telemarketing phone calls by entering
their telephone numbers into the Do Not Call Registry. The registry does not prevent sponsored
communications , except when consumers specifically opt.out of receiving them. Thus , the
registry is narrowly tailored to achieve its particular purpose. In contrast , SB 401 would havc
swept more broadly to prcvent all sponsored communications , unless a consumer affirmatively
opts.in to receive them.
Sccond, the Do Not Call Registry contains an exception for "established business
relationships" between a consumer and a telemarketer. SB 401 would have prevented
communications between paries to a pre.existing relationship. In addition , concerns about
sponsored communications see infra Section V. , could be addressed by requiring a clear and
prominent disclosure of sponsorship, but a similar, less rcstrctive alternative was not available in
the Do Not Call contcxt. See generally Mainstream Mktg. Servs. , Inc. v. FTC 358 F. 3d 1228
(lOih Cir. 2004), cert. denied 125 S. Ct. 47 (2004) (upholding the constitutionality of the FTC
and Federal Communications Commission rules that together created the Do Not Call list, 16
R. 9 31O.4(b)(1)(iii)(B) (FTC rule); 47 C.F.R. 9 64. 1200(c)(2) (FCC rule), against arguments
that they violated the First Amendment).
1t is worth noting, howcvcr, that the FTC strongly supported HIAA' s "opt. in" approach
to the ancilary use of individually identifiable health information for purposes other than those
for which the information was sought. See FTC Comment to the Department of Health and
Human Services Concerning Proposed HIPAA Privacy Rule, supra note 10. Thus, not all "opt.
" approaches are necessarily constitutionally suspect.
425 U.S. 748 (1976).
26 Commercial speech includes most advertising and labeling. Id. at 771
(advertising); Central Hudson Gas Elec. Corp. v. Pub. Servo Comm ' n of New York 447 U.S.
557 (1980) (advertising); In re R. M.J 455 U.S. 191 (1982) (advertising); Rubin v. Coors
Brewing Co. 514 U. S. 476 (1995) (labels); Lorillard Tobacco CO. V. Reilly, 533 U.S. 525 (2001)
(advcrtising and labels).

consumer welfare in a competitive free.market economy
Subsequently, in Central Hudson Gas Electric Corp. v. Public Service Commission of
New York the Supremc Court ariculated a four-par test for evaluating whether govcrnment
restrictions on commercial speech are constitutional. First, if the commercial speech concerns
unlawful activity or is misleading, it is not protcctcd by the First Amendmcnt and may be banned
entirely. Second, if the commercial speech concerns lawful activity and is not misleading, the
court wil ask "whether thc asserted govcrnmcntal intercst is substantia!."" Third, if it is
substantial , the court "must determine whether the regulation directly advances the governmental
interest asserted. . . ."30 Fourth , the court must determine "whether (the regulation) is not more
extensive than is necessar to serve that interest. "'1 To survive a First Amendment challenge , a
govcrnment actor has the burden of proving that its restriction on commercial speech satisfies
this four.pronged test.32
Several decisions have applied Central Hudson four.part test to restrictions on health
care-related commercial speech imposed by the FDA. For example, in Pearson v. Shalala 33 the
C. Circuit recognized the government's substantial interest in ensuring the accuracy of
consumer information in the marketplace, and stated that banning potentially misleading health
claims would appear to directly advancc that interest.34 The court, however, explained that, in the
case of commercial speech , the First Amendment embodies a "preference for disclosure over
outright suppression."" Given this preference, the court concluded that the FDA "disregards a
far less restrictive ' means " of advancing its interest "when thc government chooses a policy of
suppression over disclosure - at least where there is no showing disclosure would not suffice to
cure misleadingness. . . . "36 Thus , the court held that, because the FDA had not considered
whether disclaimers could have eliminated the potential for misleading consumcrs , its ban on
1999).
Virginia Bd. of Pharmacy, 425 U.S. at 765.
447 U.S. 557 (1980).
Id. at 566.
Id.
Id.
Id.
164 F.3d 650 (D. C. Cir. 1999), reh' g en banc denied 172 F.3d 72 (D. C. Cir.
Id. at 655.56.
Id. at 658.
Id.

certain claims violated the First Amendment. 1n Thompson v. Western States Medical Center
the Supreme Court applied the Central Hudson test to strike down another FDA drug advertising
ban where there were other, less speech.restrictive means available to advance the government's
goals. There, the Court observed that " (i)f the First Amendment mcans anything, it means that
regulating speech must be the last - not first - resort."38
Less Restrictive Alternatives
Proponents of SB 401 indicated eonccrns that a consumer who receives from a pharmacy
a communication sponsored by some other entity, such as a manufacturer, labeler, or distributor
may become confused about the nature of the communication and conclude that it implies a
pharmacist's sanction of a suggested alternative treatment or that it is a substitute for a doctor
advice." Requiring a clear and prominent disclosure of sponsorship could address the issue of
consumcr confusion about the source of such a written communication, without eliminating the
benefits consumers may receive from truthful advertising.40 Of course, any sponsored
communications that contain direcHo.consumer pharmaceutical advertising would be subject to
general advertising and labeling regulation, such as FDA' s requirements for labcling.'1
1t is well.established that government may "require that a commercial message appear in
such a form, or include such additional information, warings, and disclaimers , as are necessary
to prevent deception."" Not only is such an approach consistent with the First Amendment, the
535 U. S. 357 (2002).
Id. at 373.
39 E.g. CALIFORNIA ASSEMBLY COMMITTEE ON HEALTH SB 401 BILL ANALYSIS
at 3 (June 28 , 2005), available at
http://www.leginfo.ca. gov/pub/bi llsen/sb _0401.04 50/sb- 40 1 cfa 20050628 11 0823 _asm com
html.
411
Cf FTC GUIDES CONCERNING USE OF ENDORSEMENTS AN TESTIMONIALS IN
ADVERTISING , 16 C.F.R 9 255. 5 (Jan. 2005) (Disclosure of Material Connections), available at
http://www.ftc.gov/bep/guides/endorse.htm ("When there exists a connection between the
endorser and the seller of the advertised product which might materially affect the weight or
crcdibility of the endorsement (i. , the connection is not reasonably expected by the audience)
such connection must be fully disclosed. . . .
See supra note 4.
42 Virginia Bd. of Pharmacy, 425 u.s. at 771 n. 24. See also Zauderer v. Office of
Disciplinary Council of Supreme Court of Ohio 471 U. S. 626 (1985). There, the Supreme Court
upheld the constitutionality of an Ohio attorney advertising requirement that an attorney include
in his advertising "purely factual and uneontroversial information about the terms under which
10.

courts have repeatedly found it to be the preferred approach for curing deceptive speech , as
opposed to a ban on commercial speech that is not inherently unlawful or misleading.
The FTC, operating within the First Amendment analytical framework discussed above
has a long history of favoring disclosures over outright bans whcn such disclosures arc a viable
means to protcct consumers from deccptive speeeh.44 When it does conclude that certain
commercial speech is misleading and considers possiblc remcdial measures, the Commssion is
careful to ensurc that those measurcs are not overly burdensome and do not exceed what is
necessar and appropriate to remedy the deception. This approach minimizes restrictions on
truthful speech and recognizes that courts have indicated disclosure requirements may still
violate thc First Amendment if they are "unjustified or unduly burdensome."45 The benefits of
this approach are especially significant when the information relatcs to consumer health.
his services wil be available. Id. at 651. The Court stated that "warning(s) or disclaimer(sJ
might be appropriately required. . . in order to dissipate the possibility of consumcr confusion or
deception. Id. (quoting In re R. M.!. 455 U. S. at 201).
43 See, e. , Peel v. Attorney Registration Disciplinary Comm 496 u.s. 91 , 110
(1990); see also In re R. M.J 455 U. S. at 206 n. 20; Shapero v. Kentucky Bar Ass 486 U.S.
466 478 (1988). This was also the cornerstonc of the court s ruling in the Pearson case
discussed above , where FDA' s prohibition of certain health claims for dietary supplements was
struck down and the agency instructcd to consider allowing qualified claims. 164 F.3d at 657.
44 The Commission seeks bans when the speech itself is inherently deceptive. For
cxamplc, the Commission has sometimes sought bans on thc use of trade names that are
deceptive and cannot be qualified without resulting in a confusing contradiction in terms. See
, Brake Guard Prods. , Inc. 125 FTC. 138 252.53 (1998), aff' d sub nom. Jones v. FTC, 194
3d 1317 (9 Cir. 1999) (affirming FTC ordcr banning thc usc of the term ABS , or antilock
brake system, to describe non.anti. lock brake systems); Resort Car Rental System, Inc. v. FTC
518 F.2d 962, 964 W Cir. 1975) (affinnng FTC order prohibiting use of trade name "Dollar.
Day" in connection with rental car agency); Continental Wax Corp. v. FTC 330 F.2d 475 , 479.
80 (2d Cir. 1964) (upholding the excision of the "Six Month" portion of the trade name "Six
Month Floor Wax
).
See also FTC Staff Comment Before the FDA Concerning First
Amendment Issues 16 (Sept. 2002) ("the Commission has generally favored disclosures over
banning claims as a means of curing deception. . . .
),
available at
http://www .ftc. go v / os/2002/09/fdatcx tversi on. pdf.
45 Zauderer 471 U.S. at 651; see also Ibanez v. Florida Dep t of Bus. Prof'l
Regulation 512 U.S. 136 , 146 (1994). For example , a requirement that a company disclose more
information than is necessary to prevent deception may be held to be unconstitutional. See FTC
v. Nat l Comm n on Egg Nutrition 570 F. 2d 157 , 164 (7"' Cir. 1977), cert. denied 439 U.S. 821
(1978).
11-

Conclusion
Combined with CMlA' s cxisting opt.in provision , SB 401 would have modified CMIA to
require, subject to certain exceptions , that a pharmacy obtain a patient's opt. in consent before it
can provide a patient with a sponsorcd "writtcn communication" in conjunction with a
prescription if the communication includes the trade name or commercial slogan for any
prescription drug, prescribed treatmcnt therapy, or over-the-counter medication other than thc
prescription drug or prescribed treatment therapy being dispensed. This requirement would have
been more restrictive than HlAA' s privacy rule.
SB 401 ' s prophylactic restraint on a type of commercial speech that is not inherently
unlawful or misleading may have raised questions under the First Amendment to the u.s.
Constitution and ultimatcly may not have benefitted consumers. Measures that place fewer
burdcns on speech could include requiring the clear and prominent disclosure of sponsorship to
ensure that patients are not misled as to the source or funding for the communication.
Sincerely,
v(.
Maureen K. Ohlhausen , Director
Christophcr M. Grcngs, Attorney Advisor
Office of Policy Planning
ia B. Pares, Director
Matthew Daynard, Attorney
Bureau of Consumer Protection
fI
Michael A. Salinger, Director
Erik Durbin , Economist
Bureau of Economics
12.